Mubasher: Gold prices declined on Wednesday, retreating from five-week highs reached in the prior session, as US dollar crept higher.

By 8:33 am GMT, spot gold fell 0.26% to $ 1,235.35 per ounce, after hitting $1,241.86 per ounce in its last close, the highest level since 26 October, while US gold futures dropped 0.51% to $1,240.30 per ounce.

“Gold is mainly tracking the US dollar,” Singapore-based dealer GoldSilver Central managing director Brian Lan told Thomson Reuters, adding that Wednesday’s “move in gold prices is a correction because yesterday prices were up quite a bit.”

By 8:17 am GMT, the US dollar index, a tracker of the greenback against six major currencies, rose 0.16% to 97.1180, despite the pressure of falling Treasury yields which sparked fears over economic growth.

The benchmark 10-year Treasury yield dropped to its lowest level since mid-September, while the gap between the 10-year yield and its 2-year counterpart also shrank to the smallest since the beginning of the financial crisis in 2008.

This signaled for some investors an incoming economic slowdown, triggering expectations that the Federal Reserve would end its interest rate hikes sooner than previously thought.

Moreover, Asian stock markets plunged in line with Wall Street as re-emerging trade concerns sparked jitters over global economic growth.

Although US President Donald Trump held out the possibility of extending the 90-day ceasefire with China, he threatened to revert to “major tariffs,” should both sides fail to resolve their differences.

“Normally you would expect a better outing from gold given the absolute beatdown in stocks, but this is a baby step for the precious metal,” New Delhi-based Adroit Financial Services portfolio management services head Amit Kumar Gupta told Reuters.

“Gold at this point will correct a little more [as] $1,242.5 is the level gold has to test before it goes up to the next level. The downside we are looking at is $1,230,” GoldSilver Central's Lan said.